Andrew: Three messages before we get started.
First, do you need web design work? Go to LaunchTower.com. It’s run by Alex Champagne who has helped me with a lot of last minute projects at Mixergy. Now he is running a design company at LaunchTower.com.
Second, do you need a lawyer who actually understands the start-up world that you live in? Go to WalkerCorporateLaw.com. I’ve known Scott Edward Walker for years, so tell him you’re a friend of mine when you go to WalkerCorporateLaw.com.
Finally, what are the big challenges that you have as a founder? Go to MixergyPremium.com and take courses taught by proven entrepreneurs who want to help you get through your toughest challenges. MixergyPremium.com. Let’s get started.
Hey there freedom fighters! My name is Andrew Warner, I’m the founder of Mixergy, home of the ambitious upstart. How does a math tutor turn his part- time work into a multi-million dollar business? Andrew Geant is the CEO and Co-Founder of WyzAnt, an online tutor matching service. I invited him here to talk about how he turned that part-time work into such a successful business. Andrew, welcome.
AndrewG: Thank you, Andrew, it’s great to be here.
Andrew: It is kind of cool that we’re both named Andrew. It’s easy for me to remember the guest’s name today. I said multimillion dollar business in the intro. What were your sales last year? Actually, what were your sales over the last twelve months?
AndrewG: Well, it’s in the tens of millions of dollars at this point and in gross sales, so the business has really scaled over the last few years. Which actually is consistent with when we started hiring people. So, we’re a pure boot strap company, and it was just two of us for three years. And we definitely had some good growth over those three years as well, but things have really ramped up over the last several years.
Andrew: And I saw that there were some ups, and of course there were some downs, some challenges that I will ask you about later on, including the time that you had to actually let people go because sales weren’t what you expected them to be. But there was one incident that stood out for me in your story. 2007, you used to check your stats all the time, and in the early part of 2007, you checked your stats one day and saw what?
AndrewG: Well yeah, we would literally log in from our phones if we weren’t in the office, and if we were in the office we would be monitoring sales very closely, which we do to this day. But at the time, I think it was the weekend, and it was towards the end of February. We were in New York recreating, and looked at the numbers, and it was looking like we were going to do over 70,000.00 in sales, which at the time was just such a huge number. And it was for whatever reason, it was a number where we said, “You know what? This is permanent. This really worked, we’ve done it!” And Mike, my Co-Founder and I had kind of the same reaction. It was just awesome. We were literally high-fiving in the middle of the street in Manhattan. We ducked into a bar for a couple drinks, and it was really cool to know that it was actually here to stay.
Andrew: Unreal, and that’s at a point when you were almost going to do a million dollars in annual sales, right?
AndrewG: Yeah, that year I think we did top a million dollars for the first time.
Andrew: Was there celebration for that number, too?
AndrewG: Yeah, we celebrate a lot of numbers. We like to take a step back and feel good about where we’ve come from. But, of course, we’re always looking for ??? as well.
Andrew: Yeah, like me you guys love numbers, and like me you also were going to go into Investment Banking. In fact you actually worked towards it, and you got a job on Wall Street, right? What was the job?
AndrewG: Yeah, I can’t say I had a career in Investment Banking by any means, but I did the whole summer internship thing. It was funny, I went to Princeton, Mike and I did, and there was a huge movement from Princeton to Wall Street, at least when we were there in 2005. I think it was like half of my classmates took a job in financing in New York. And so I kind of got caught up in that, and I never really thought of what else I wanted to do. I was like, “This sounds good.” So, I did the whole summer internship program at Merrill Lynch in investment banking; took a full time offer which they strategically give you in the fall going into your senior year, and give a big sign on bonus so it’s hard to resist, so I signed up. And well, in my senior year I began to wonder if this was really the right move, but I had already committed, so I went for training and literally, I think it was maybe a week into training when my investment banking career ended.
Andrew: Unreal, what was it about working in investment banking that within a matter of days you said, “No way, it’s not for me.”?
AndrewG: Yeah, well it was really the lead up to it. Like I said all Senior year I questioned it, but within my first week there it really confirmed my suspicions and my concerns that, it’s hard to put my finger on it, but it was more of a gut feeling and I tried to look forward into my career and ask myself, “Am I going to be really passionate about this? Am I going to feel this or is it going to be forced?” It felt more forced and so I left, without any plan whatsoever.
Andrew: Were you scared?
AndrewG: Yes. It was a real tough time for me, honestly. Going from what I thought was a [??] world, graduating Princeton and having this big job [??] things going to be [??] there and then I was at home hanging out at my parent’s house [??] and started making [??], which is not the way I had planned to be.
Andrew: Did you find yourself doubting yourself at that time?
AndrewG: Yes. It was definitely tough.
Andrew: How do you get past the internal doubts that you feel when you have no plan for the rest of your life and you just turned your back on a company after days of being hired and getting started? How do you pick yourself back up?
AndrewG: It was latching onto this new business. It wasn’t forced. It was not my plan. It wasn’t premeditated, “I’m going to start a new business because that’ll make me feel better about myself.” It just fell into my lap and I just embraced it and put everything I had into it. I wasn’t doing much else at the time and that helped me build my confidence back, to be working towards something and be passionate about it. It was that excitement factor that I had lost and once we started having a tiny bit of success that helped me re-establish my footing and say, ‘Now I can do this.’ We went from there.
Andrew: How did tutoring get started for you? This was 2005 right after you quit, you got into tutoring. How’d you start?
AndrewG: I needed to do something and I was always getting asked so I figured, “Why don’t I do some math tutoring while I figure out what career I’m going to go [??]?” It wasn’t even a career in my mind. It was something to fill the gap and that’s where the [??] came out of, obviously. While in [??], I didn’t even do any tutoring. I was [??] to do tutoring and before I had had my first lesson in name [SP], the idea started to occur to me in bits and pieces and I reached out to Mike because he was somebody [??] brands [??]. I knew he was [??] an entrepreneur even though he had taken a full time job as a software developer. I knew that eventually he would start a business and why not [??] him now and get him to help me out. Of course, he has great technical skills and he immediately thought it was a good idea and we did a lot of brainstorming back and forth. I moved down to D.C. to start the company with him.
Andrew: Hold on. Let’s take it a little bit slower because I want to introduce Mike, who is your co-founder, in a way that lets people understand what it was about him that drew you to him and what made you say that this is going to be your co-founder. First, let me understand this. Putting yourself out there and saying, “I’m going to be a tutor for math”, it takes a little bit of guts. When I remember graduating from college, all of my friends were going to work on Wall Street or at some big management firm or some great job and here I was a guy who had great grades, who everyone said was going to go somewhere. I was going to go to my house and think about what my next business was going to be, or what my first business was going to be. I felt like a failure at that point. To even pop my head up and tell the world that I’m going to offer some service for money or anything like that felt like, “This is so small compared to what I could be doing or what my friends are doing.” It took some confidence. How did you get to that point?
AndrewG: I decided it felt better than nothing and I didn’t look at it like some sort of second rate thing. It was [??] and I needed to feel like I was doing something productive. Like I was saying, I literally never even did an hour of tutoring in Maine. It was the process of looking to do tutoring that spun into this business.
Andrew: I missed that completely. What you’re saying is you were just thinking, “I could go do tutoring.” As soon as you said, “I could go do some tutoring,” you immediately said, “This could be a bigger business than just a tutoring [??] job.”
AndrewG: As soon as I looked to promote myself as a math tutor, my instinct was to go online and [??] got to be somewhere online that would be a good forum for me to attract customers and market myself as a tutor. As soon as I realized there wasn’t, that was when the wheels started turning. It wasn’t like I was a math tutor for five years and then I have this revelation. I hadn’t even become a math tutor when I realized, “Wait a second. There’s no place online to promote myself. Here’s an idea.” Once we did set our business in D.C. I did a lot of [??] to help pay the bills. I was [??] most prolific tutor for a couple of years there, which was awesome. I [??] great context and great experience to now be in a position where I’m managing a company whose end product is [??]. [??] a product is tutoring so by being a tutor for that first year, or so, that was really good experience.
Andrew: Your Co-Founder, am I pronouncing his name right? Michael Wisehuhn?
Andrew: Weishuhn. You guys met as undergrads at Princeton University. How did you meet?
AndrewG: I met Mike literally the first day of school and [??] had [??] program called Outdoor Action which is [??] high schools do it. It’s a camping trip, or hiking/camping for a few days. A bonding thing, small group to help people make some friends and I had signed up for level three out of ten [??]. Honestly, I think my mom put me down for [??] when she was filling out the forms. And said, “He’s going to go on some little easy hike. I don’t want him [??] any cliffs.” [??] I was [??] I was underachieving with my selection of difficulty. Then we were about to depart and this tall, goofy guy comes running over. He had just missed his bus to the level ten crazy, hiking, canoeing, mountain climbing trip that he was going on, which is typical of my disheveled [??] and comes running over apparently [??]. Now he was stuck with us going on our level two trip. Total goofball and that was Mike. We started talking. He was on the track team as well. He was a high jumper and really eccentric guy, was my first impression. There’s a lot [??] you meet different people that you had never met. I [??] having friends who were real [??]. It was cool. We connected. We were totally different, but we totally connected and spent most of that trip chatting [??] in the back of the [??]. He was always distracted by something.
In this case it was he wanted to build some sort of walking stick, so he was trying to whittle this stick and ended up slicing his thumb open and getting [??]. Some van had to come pick him up because he had to go get [??] and that’s also [??]. There’s a lot of things about that first interaction that were typical of Mike. It was fun and then we became really close friends and, like I said, [??] senior year we started talking about more than just parties, we started [??] careers and that’s when I realized we also shared this connection with having something [??] to start a company one day.
Andrew: It was something that he did that made you feel like this guy can really be a good co-founder. When the rest of us saw Facebook and thought, ‘Interesting idea,’ he saw it and said that he was going to do what?
AndrewG: [??] for fun. A lot of this, even to this day, he’s like, I’m just going to build Facebook. It’s not that hard. Back then when it was just at a few schools and he literally built what looked and [??] Facebook in three days [??]. May even have been for some project, but he took it to a different level. He’s like, “I can do this.” It was a personal challenge and he [??] it. That really opened my eyes. I didn’t have a lot of technical expertise. I didn’t know anything about development and to see that end product from a bunch of code this one guy was able to put together in a matter of days was really eye opening for me and also spoke to Mike’s level of skill. That was a cool moment.
Andrew: When you had this idea in Maine that there should be some marketplace for tutors to put themselves up and for students to come find tutors, you thought, “He’s the right guy to talk to.” Did it take a lot of persuading to get him interested in your idea and to partner up?
AndrewG: Not at all. He was all over it right away.
Andrew: Before we hear about what the first version looked like, I’m curious about what the idea was.
AndrewG: The idea was, obviously, I had the realization that there wasn’t a good way to market myself as a tutor. That was back to number one. I also noticed in college [??] I saw from college that there [??] a lot of untalented, intelligent, very skilled young people, the students, yet they’re working in the cafeteria, the library for minimum wage and there seems to be a disconnect there. That was realization number two, and then number three is once I started exploring a little bit, I realized that parents and adults who are looking to hire tutors had such a hard time finding tutors. It was just a very inefficient process. Here we have the supply side on the tutors not being able to find students and we have the demand side on the students and parents not being able to find tutors. Then the middle piece was, “Wait a second, I can turn these college students into tutors.” That was the original idea, to mobilize college students as tutors and to create a market place online; a searchable directory where you could find the tutors, you could pay the tutors, all kinds of other functions to make the market more efficient.
Andrew: That’s a lot that you want to do, find, also make sure they get paid, etc. How did you know what to launch with, of all of those features?
AndrewG: That was it. Those were the two, a searchable directory of tutors that you could pay for online. Those were the two primary functions. Which to this day are still two of our very primary functions, although they are a lot better now, than they were.
Andrew: OK. Was there anything that you wanted to leave out? That you had to force yourself to leave out?
AndrewG: Anything that we wanted to add, that we didn’t?
AndrewG: Yeah, it was very raw. While those are still our core two functions today, it’s just so much better than it was. For instance, the tutors didn’t even have a way to sign up online. I had to email these people Microsoft Word forms and then they would email them back to me and I would input their data into our database. It was just all very manual. There are so many systems and processes that didn’t exist yet. I think one of the smartest things we did was go-to-market with something that was very raw, early on, and that ended up being a really good way to help guide us in what is the next most important thing to add on.
Andrew: You know what? I’m looking at two of the questions that I asked and I’m thinking, “Boy, am I off my game here?” Because you clearly said there were two features and then I hit you with, “How did you decide of all the possible features what to launch with?” and then earlier on when you said “I didn’t tutor,” I totally missed that. The reason I missed it, is because I’m anticipating where you’re going, instead of being more present in the conversation. Now I’m at a place where I’ve got articles on you and sites that do nothing but aggregate articles on you. There’s, like, a site that’s called “Newsly.com” and anyway, I have all this stuff which tells me where I’m going with this interview and also really prepares me for this interview, but I’m realizing that there’s a drawback to it, which is, I’m not paying as much attention to you, as I should be, instead of paying attention to you…
AndrewG: You clearly are, I think. There are some versions of the story, maybe, that have gotten lost in translations that are out there that maybe are influencing where you thought that this was going. There are some subtleties that you are clearly picking up on, that I’m glad, “Here’s our chance to set the record straight. Here’s how it all went down.” I think you are doing a great job.
Andrew: All right, thanks. I hate when I watch interviewers and they goof. Then I think, “Are they too stupid to notice that they screwed up?”
AndrewG: Well, you got it right.
Andrew: I try to acknowledge the goofs and let the audience know, “Yeah, I know.” Sometimes, I can’t jump in there and tell you that I know, but I know. All right. You guys launch and the first version you told Jeremy, our producer, who created the notes that I am looking at here, actually aesthetically didn’t look so great, right? Well, you tell me what the first version looked like.
AndrewG: Aw, man. It was rough. It was really rough. We had this buddy from college who lived in Baltimore, so I went up there and he filled, like, literally the front end of the website in three hours. I paid him a hundred bucks, which was a fortune. We had these little ants that were animated, doing different activities, going across the top of the site. We still use orange as our primary color. There were all these variations of orange that did not look good together. It was rough, but once again, going- to-market with that was really smart.
Andrew: Why? Why was going to market with this site that you still think is a little rough; that had these ants everywhere. Why was that the right thing to do?
AndrewG: In our particular business, since we match tutors with students locally, or in-person lessons, we didn’t need to have tutors. We could do it in one town and it would work. It would be enough to start getting some insight into how the whole thing worked and learn while establishing some [??]. It’s never been done before in this tutor market place, before we went crazy with it. All we needed was something that was somewhat functional. We did start very small; we were just in the Washington, D.C. area. In fact, just in Northern Virginia, is where we started. We were living in Messing [SP], Virginia. It wasn’t like we were going to taint our reputation by doing this massive launch and having it bomb. It was literally two people a day, using it, and then we would drill them with questions with what they would like to see; what did work, what didn’t work. It was a very small operation, so it didn’t really matter that much. If somebody had a bad experience on the website, and then they got a call from the founder immediately saying, “Hey, we’re really sorry about that.” They would realize that, clearly, this is very small. They were more than willing to help us and prioritize what needed to be done.
Andrew: I see. That was one of the ways you solved the “chicken and egg” problem that market placers have, right? The problem, of course, is you need to have both sides at your spot, at the same time. Frankly, for start- up, it’s hard enough to get one group of people to come to the site, but to have two people come in, and to have enough of both people at the same time, so that it actually works, is really difficult. One thing you did was you focused on a local area. What else did you do? You still needed to bring in tutors and students, at the same time.
AndrewG: Well, that’s a good point. It reminds me of, kind of, a funny story that was just the reality back in the way we went about it. We needed tutors before we could get the students. At the start of the day, we would go to the college parking lots of George Mason and Georgetown and GW and the other schools in north Virginia and D.C. area. We would plaster the student parking lots with flyers under the windshield wipers, saying, “Hey, are you good at chemistry? Are you good at piano? Do you want to become a tutor on our site? Do you want to make 25 to 35 dollars an hour?” This was our gig pitch, because in my view, all these college students were under- employed and under-paid. During the day, we would do that and at night we would go to the high school football games and other activities. We would have a different set of flyers that we would plaster under the parent car’s windshield wiper, saying, “Are you looking for a tutor?” We were managing both sides of the market place. Even within a particular given day, we were kind of building supply and demand at the same time. You are right. It’s very key to have that balance. If it doesn’t work for tutors, if they are signing up and wasting their time and they’re not getting business, that’s not a good experience. If the parents don’t have enough selection, if they aren’t being given the ability to find a tutor, that’s not a good experience. It’s difficult to balance. To this day, it’s definitely something we’re very aware and tuned into.
Andrew: That’s something that Andrew Mason, another Andrew, told me about for Groupon. He said the reason Groupon was able to work, is because they focused on just a small community. In his case, it was not just Chicago, where you are today, but he said, “I could just go up and down the building that we were working out of, and get a bunch of people who could buy some of the first products that we were selling.” If you focus that tiny, then you can expand and expand from there.
AndrewG: Yeah, it’s not every business where you can do that, but certainly in the case of Groupon, where you have one merchant and 20 consumers and everyone is happy, it’s the same thing. We can have a handful of tutors and a handful of students and as long as we can match them up, everyone was happy and it was functional. The other thing is, and the same thing for Groupon I guess, is to have a business model from the very beginning. Even in its infancy, even when it was tiny, like one transaction a day, you still had a business model that you can begin to understand way back from the very beginning.
Andrew: I see. I think it was Jason Fried who told me you should only focus on one side or the other of that equation. Was there one group of people that you felt you had to spend more time on? If there was, how did you decide which one?
AndrewG: Well, certainly, marketing is where we spent 80% of our time and resources on the student side, which obviously, are mostly parents.
Andrew: Why did you spend more time there?
AndrewG: Why, you said?
AndrewG: Partly, because, we had very little trouble getting tutors to register with us. It’s a pre-proposition. We only are a business model where we take commission if we generate business for you. We are asking people to invest 20 minutes to complete a profile, get approved, and go through a simple registration process. It’s not a huge commitment on their part. Whereas, on the student and parents’ side, it’s a lot bigger of a decision to get into our palm. You have to be willing to hire a tutor online, which over the last seven years has gotten more commonplace, but back at the beginning it was kind of a strange proposition to go online and find somebody to work with your child, in your home. That was always a tough sell. It’s an expensive product. It’s just a much harder sell on the parent and student side. We wrote the [full balance] as paying customers. The flow of the funds goes from the student to WyzAnt to the tutors. But the tutors are paying us too, because we are taking a commission. We certainly have two sets of clean customers. But, it’s a lot harder to generate the students. That’s what our tutors want us to do. They want us to spend our time and resources generating business for them.
Andrew: You mentioned that you called up everyone who used your site and you said you just drilled them with questions. Before I ask you what questions they were, I’ve got to acknowledge that when I needed to do that at Mixergy, at first, I was reluctant to do it. Today, I’m making more and more phone calls to potential customers and to customers, but I wish I had done it from the beginning. The reason I didn’t, was because I felt, “What if they tell me they don’t like my product?” You know, they just bought it. What if they tell me that they don’t like it and now they are going to acknowledge to themselves that there’s a mistake here. By acknowledging it to themselves, they are going to sell themselves on not doing business with me. Did you have any of those issues?
AndrewG: Honestly, we were so excited and committed to making this work, that we were not bashful. Let’s put it that way. We would do anything to get this company launched. Mike and I are pretty competitive people and failing at this never was not an option. Maybe it goes back to what you said before, “Here you are. You graduated from college. All your friends are working at these big consulting, investments banking jobs or going to law school or medical school. Here you are, starting a business.” It was cool, but back in 2005, it was less commonplace. It wasn’t as “hot” as the thing to do.
AndrewG: We really felt that we had to prove ourselves. We had to make this thing work. That, and the fact that our friends are jet-setting all over the country with their big salaries and doing cool stuff. We couldn’t do any of that. We were going to make this work. We were going to do it as quickly as possible, as well as possible. We were not bashful. We would call a customer. We would walk up to people in the street and tell them about WyzAnt. We would go stand outside at elections and literally just go up to people and say, “Hey, here’s a pamphlet. Let me tell you about our company for 10 seconds.” It was shameless. We try to retain that today. It goes back to being food-strapped and not having any clear choice. Today, we have choices. We have resources. At the same time, we still retain some of that hunger that we had back then.
Andrew: What did you learn by drilling those early customers and tutors on your phone calls?
AndrewG: We learned it was going to be a tough sell to get parents comfortable with hiring a tutor online. We learned that there was going to be some apprehension there. We learned about pricing and what people thought was reasonable. We learned what subjects were going to be the most important to people. Where is your child struggling? What courses? Things like that. Just some of the basics, which would have taken a lot of time and cost a lot of money to figure out.
Andrew: What was the most shocking thing that you wouldn’t have figured out on your own? That you learned only because you made phone calls?
AndrewG: I think we were surprised at how many people hire tutors. In talking to people, it was always our first question, “Have you ever needed to hire a tutor for one of your children?” We didn’t go into this with a lot of industry market research. We had no idea what the size of the industry was. All we knew, was I was looking to be a math tutor and we had some parents out there looking to find tutors so let’s give them a way to connect. As we got into it, we realized, “Wow, this is a bigger idea than we thought.” Come to find out, tutoring is estimated to be between six and eight billion dollars a year. It’s a huge industry. Things just kept getting better and better.
Andrew: Did you hear about other places where parents were looking for tutors that maybe, you didn’t anticipate?
AndrewG: Yes. Historically, tutoring is an enormous word-of-mouth business. To this day, it’s still probably our biggest competition is word- of-mouth. That’s probably where most of the business comes from, for tutors. We also learned that parent’s first instinct is to call their friends and their second instinct is to call their schools. Both of those things are kind of hard to penetrate. But, I think, over the last few years that the instinct of going to the Web has become right up there, as well. We are obviously benefiting from that.
Andrew: At what point did you decide to quit doing your own tutoring so you could focus fully on building the market place?
AndrewG: I think it was about a year in.
Andrew: So, in a full year, you were still doing tutoring and it wasn’t until how much had you earned a month, after that first year?
AndrewG: In WyzAnt revenue?
Andrew: No, actually total revenue. There was a number that you hit, right? It was $3,000 in revenue. I think that you hit that made you say…
AndrewG: Yes, I thought you were asking me my personal tutoring business. WyzAnt was doing about $3,000 a month. Mike was working full-time at the software development shop for six months, worked there from 8 to 6 and then stayed till 11, using [??]. Which was totally cool. It was actually perfect. He was able to learn from his training and from the other resources there. [People] were very supportive of it, and [??] producing after six months. Then my job, the way I looked at it was I need to prove this concept to him. [??] working full time, but I was standing there. He’s got Pseudomones and everything else. I can’t expect him to take it upon him, so let’s prove it to him. And $3,000 a month in gross sales was not enough to live off of, was not enough to do much with, but it did prove the concept, and Mike is risk taking and said, “Hey, that’s good enough. Let’s do this.”
Andrew: I see. OK. Once the business reached $3,000 he quit his job, and once the business hit how much did you feel, “All right. I can stop doing part time tutoring work?”
AndrewG I think it was probably about six months after that.
AndrewG: We would have been maybe $6,000 a month, something like that.
Andrew: OK. And how were you able to live for $6,000 a month, two guys. I live in D.C. right now for the next few weeks. It’s freakin’ expensive because you’re competing with diplomats for real estate and dinners.
AndrewG: Yeah, frugally. We lived very frugally. We had a couple good strategies. One was we always rented an extra bedroom in our apartment. We’d get three bedrooms. Well, our first place was a three bedroom, and we rented the third for half of our rent.
AndrewG: Our second place was a five bedroom, so we upscaled this idea, and so we rented two of our bedrooms for about 60% of our rent. That helped. We did not go out very much. We found a lot of really good happy hours. So when we did go out, the bill was about $14. A lot of Costco frozen food. We actually started brewing our own beer because it was less expensive.
Andrew: Get out!
AndrewG: Yeah, we got to be sociable, for sure.
Andrew: Unreal. All right. Here’s a thing that also happens with Marketplace, especially in situations like this. A parent could find a tutor on your site and say, “We love this tutor. Screw this WyzAnt and their commission. We’re already talking to the guys in our house. We’ll split the commission. I pay a little bit less. He earns a little bit more. WyzAnt’s none the wiser for it.” How did you avoid that?
AndrewG: It’s one of the biggest challenges of our business model. That’s why you see a lot of service matching companies who are subscription-based businesses. We’re probably a lot simpler to execute. But our belief was if we add enough value to both sides of this marketplace to justify, that’s consistent with our pricing, then in aggregate, this is going to work. There are always going to be corner cases, instances where people might go offline. But we’re looking at it from probably a highest level. If value proposition is there, it’s going to work. There are two schools of thought. One is you can try to be Big Brother. You see other companies, not just tutoring, that make you sign your life away on these huge contracts. “So we’re going to sue you if you whatever.” That’s one way to do it by being very forceful. Or what you can do is try to build features that are really useful to your customers.
Andrew: For example, what’s a good feature? If I already have a tutor for my kid, and I like him so much that I want him to come work for me once a week for the rest of the semester, if not longer, what’s a feature that you give me that would make me say, “Alright. I’m going to keep going through WyzAnt”?
AndrewG: One example is just the ability to put it on your credit card and not have to worry about sending your kid to the library with the check in the right amount or whatever. Having your credit card on file and having the transaction be seamless is actually very valuable to customers. I think you’re seeing that in a lot of other businesses. I was actually just going to use Uber as an example of a company that successfully adds enough value where you don’t feel compelled to try to strike a side deal with the driver, and the driver doesn’t feel compelled to strike a side deal with you because the product seen is given out, and the value you’re creating is given out. It’s the same kind of idea. The other thing with Uber, one of the value adds is that if you handle the transaction, you don’t have to pay the driver [??]. And that’s one thing that we do as well. You can log into your account and get full recording on all of your lessons. You get feedback from tutors after you saw them through the WyzAnt system. We have a lot of things we do to make it worth your while. And also to make it worth the tutor’s while so they’re not going to be incentivized to take [??] offline. If you can add value to both sides and do it well enough, you’ll be OK.
Andrew: What about ratings? I know I’ve sometimes used sites like Elance to hire developers, and when I work with the developer there and say, “Can I just wire you the money,” they always want me to go directly through the site. “Can we talk personally on the phone?” “No, let’s talk through the site.”
AndrewG: That’s the idea. Ratings are huge. We probably have about 200,000 lessons that have been rated and probably 30,000 full written reviews on tutors. The nice thing about our business is that only people who have paid for and had a lesson can rate a tutor, so you know that they’re valid ratings. It’s not like an open forum, like a Yelp or something where there is a lot of quality control concerns and questions there. In our case, only paying customers can rate the tutors. We hear all the time “wow this is so helpful, this gives me so much confidence. These other people in my neighborhood, in my town, many of whom I recognize, have used this tutor since high school.” They probably get some of that word of mouth thing that gives people that assurance.
Andrew: I want to talk about how you expanded beyond this small part of the DC area, but first, you mentioned that you gave out fliers. You also would post fliers everywhere and there was one time that you got in trouble for doing it. Can you tell our audience about that?
AndrewG: Outdoor advertising was our bread and butter back in the day. We would take these big cardboard fliers and put them on telephone poles and stake them into the ground – all over the place. Then one day we ventured out of Northern Virginia into Bethesda Maryland, expanding our territory, and did the same thing. The next day we got a call from the Bethesda Police Department saying there was an ordinance, and if we violated this ordinance it was a $500 fine per sign that we would have to pay them if we didn’t remove them. Meanwhile, we used to do this in the middle of the night and put up 50 or 75 of these things on telephone poles. We had no idea where all 75 were. At the time, if we had only gotten 70 of them, and had to pay a $2500 fine, we would have been totally out of business. It was a mad scramble to try to retrace our steps and go rip the signs down. Fortunately we don’t do guerilla-type, potentially illegal outdoor advertising anymore. We hung that strategy up.
Andrew: I’m not sure I’m reading this right from Jeremy’s notes. It says “we went on singing missions?”
AndrewG: I think you probably meant signing.
Andrew: Signing, all right, that’s what I thought. So it’s just posting up signs everywhere. Shoot. I was hoping there was some singing involved. So how do you – you can’t possibly go to enough football games and enough college parking lots to make this market in every single town. So it’s time to expand. How do you go beyond your personal reach?
AndrewG: The answer was paid and organic search. Quite honestly, that’s how we did it. We had to understand search engine optimization, which, as you probably know, is a massive field and is more and more of a science and art that people and big companies are recognizing the value of now. Back then it was a little more rudimentary, but we recognized the importance of it right away. And on the paid search side, we had to figure out what our most important key words were, what our ability to pay for those key words were, and establish an understanding of Google ad words and other paid ad words.
Andrew: How did you know what a life time value of a user was? You guys didn’t have such sophisticated understanding of each new market or even of each customer to understand what that would be did you?
AndrewG: Well the beauty of it was, we were still in the Northern Virginia/DC area, and we did have, at that point, a year’s worth of data. We knew what we could pay for various subjects. It was just a matter of tweaking and fine tuning it. Once we had some link-building strategies that were good and some on-page optimization that was working in DC on the SEO side, we said “okay, we can scale that.” The best was with Google Ad Words, once we had a lot of panel’s structured, we would just, literally, copy it over into a new market and we’d have inquiries. It was mind-blowing at the time. Literally I would just flip a switch and then these ads are showing up in New York, which was the second market we attacked. Then L.A. Then Chicago.
Andrew: And you did it one market at a time.
Andrew: How’d you know which markets to go into?
AndrewG: We just went by the biggest markets. New York, L.A., Chicago were the next three, and then we spread out to the Houstons of the world. Then I’d say a year into that kind of expansion, we just, again, flipped the switch and made everything national and there we were. We had a footprint nationally. It was really pretty powerful and cool. Paid and organic search continue to be very important for us.
Andrew: And you hired marketers to help you expand in each market?
AndrewG: No, at that point, we really were not pounding the pavement so much. The transition was exclusive online marketing, which is where we still operate.
Andrew: OK. At what point did you start to hire them? I know that you got to a place where you expanded a little bit too aggressively, you hired too aggressively. This was roughly around 2008. Where in this story are we now?
AndrewG: From the very beginning, our mindset was, “Let’s build a black box that we can scale into a multi-million dollar company, just the two of us.” That was the goal. We took that to the extreme and maybe even a little too far. By the time we succeeded, we were doing probably $4,000,000 in revenue. Just Mike and I and our black box. But the problem was I was trying to be the Customer Service department, the CFO, the CEO, the Marketing department. I was stretching myself a little too thin and all the areas were kind of suffering. We said, “OK. Let’s hire some people. Let’s do this.” We made one hire to help us with customer service. That was pretty methodical. That was the right move and then we got a little carried away. We said, “OK. This is great. Wow. Look at how much value this person has. This is awesome. This is freeing us up to do all these other things.” Before we knew it, we had hired maybe six more people, which is really uncharacteristic for us. Without really projecting and doing a little model to understand how we were going to pay for that, it was a rash, uncalculated decision that came back to bite us. We had to let some of those people go, which was rough. This was in the end of 2008, early 2009.
Andrew: We didn’t talk about pricing. The tutors price themselves, right?
Andrew: How do you know what to take as a commission off of that?
AndrewG: The way we have always looked at it, is we want people who become lifelong WyzAnt tutors. Let’s accomplish that by building an incentive. We start by taking 40% commission. The more hours they accumulate, we take less and less, all the way down to 20% commission. It’s important to keep in mind, as you look at that, that on the flip side the parents and students are getting discounts of up to 15%. There are a lot of instances, where our commission is only 5%. You then have transaction fees and things like that.
Andrew: How do you come up with this system at all? It’s so hard to figure out pricing, especially if you are working in a small market with a lot of word-of-mouth. If you come up with one price and then you change it the next day and then you raise it the day after that, parents are going to talk. They will feel ripped off unless you give them all the same. How do you figure it out?
AndrewG: The parent side has always been really simple. The tutors list their hourly rate and that’s what they pay. About half of the people pay as they go. After each lesson, the tutor puts together a lesson, they get an email; we charge their credit card. Very easy. Very seamless. Very transparent.
The other half will buy our discount package, which is also pretty easy. I’m going to pay $360; I’m going to forward it into WyzAnt credit that I can use for any of the tutors. After each lesson, it gets deducted from my WyzAnt credit. That was important. We kept it very simple on the student and parent side of the equation. The tutor side is a little more complicated. You have these different thresholds of hours that you have accumulated and our commission goes down. Even that’s pretty straightforward. The idea was, “Let’s have a tutor at the very beginning say, ‘Ok, if I accumulate enough hours, I’ll be making 80%, and I can convince my students to get 15% discount packages, and I’m essentially taking home everything.'” Giving them that kind of carrot really helped us. By the time the tutors are that good and entrenched in WyzAnt, we are happy to take a very small commission. They are our biggest advocates. They’re our salespeople. WyzAnt is designed to…
Andrew: I see how perfect this is. What I’m curious about, Andrew, is how did you get to this? And more importantly, how does the person who is listening to us, who is trying to figure out where to price her business, how does she get to this perfect model that you’ve gotten to, or maybe we can’t call anything perfect, but it’s close to perfect as possible?
AndrewG: The true pricing, which is what the tutors charge, is dynamic. They can change it any time and that’s the market place that we love. If tutors aren’t getting enough business, they lower their prices. If they’re in Manhattan versus rural Arkansas, they can change their prices accordingly. That’s the nicest part. Having a market place, makes the pricing in line with the market, by definition. The end consumer, the parent/student, is paying based on that market price. The pricing on the tutor side is just a commission schedule. Honestly, it has been the exact same since Day One. I wish I could tell you some crazy story about the science that went into it, but it’s been there since day one. It works effectively and, again, it’s all designed to create that long-term allegiance on the part of the tutors.
Andrew: OK. Now is this based on you putting yourself in the shoes of your tutor and thinking what would they think is fair? How does this model work for them?
AndrewG: We sort of did some market research and the traditional tutoring company, the big brand names, the more kind of old school companies would take between 60% and 80% of the commission and the tutor was left with 20% to 40%.
AndrewG: So we decided that if we come in and give the tutor 60%, we’re already really revolutionizing this industry, and if the tutor can make up to 80%, that’s unheard of in the tutoring industry. We obviously did some calculations and we decided that ok, this business model will create enough of a margin to make this a functional business. There was some thinking that went into it of course up front and some market research, but it’s not something we’ll tweak a lot.
Andrew: What about scheduling? You talked about having the parent find the tutor and so on. I know here we book tons of entrepreneurs, all very busy, we have to coordinate with them. It’s not easy to schedule it. What have you done to make it easy for your people?
AndrewG: Yeah, so scheduling was one of the things we thought, like you’re kind of getting at, that would be the most important function or one of the most important functions that we provide. We built way back in the early days this complex calendar system where students could grab hours. It would adjust the calendar and kind of buffer around the block of hours depending on how far away a student was so that they could make the travel time. But it just totally flopped. The tutors were not keeping it updated. It was too much to ask. There were just too many moving parts. People were rescheduling. It was one of those lessons that we learned where we thought we had the perfect system. We put a ton of research into building it and it wasn’t the perfect system. It wasn’t even close to the perfect system. We had to scrap it entirely.
The easiest way that we found that scheduling works is to empower the tutors, like I was saying before, to be their sales people. We don’t schedule them. We don’t tell them when to go, where to go, or anything like that. Let’s give them the tools to be out there on their own. We haven’t necessarily had a true scheduling engine since that first one flopped, although we’re now approaching it again. We’re working on a new one six years later. But at this time we’ve learned our lesson and we’ve run polls. We’ve polled probably five thousand of our tutors on what they want and what features they want. We’ve talked to a lot of them. We’ve done these detailed surveys. We’ve talked to our student’s parents. So we’re building a product at this time that’s not so souped-up and is not our vision of how it should work. It’s the tutor’s vision of how it should work.
Andrew: Let me see if I understand this, Andrew. You’re saying that the first version that you built, you spent a lot of time. It had a lot of features. It bombed. People didn’t want to use it. The second version was essentially just letting them message each other. It wasn’t a scheduling system at all. It was just the tutors posting their hours, the parents picking from those hours, and coordinating.
AndrewG: It was just our messaging system. Yeah. Let’s give them easy ways of communicating with one another through our WyzAnt messaging system and let them figure it out.
Andrew: And that worked over half a decade.
AndrewG: Yeah, but as we look at ways you can add value, this is one we think let’s give this another try.
AndrewG: And now especially with mobile usage we can give people an easy way on the fly until their next lesson and then after they complete a lesson with a student. Things like that that maybe wouldn’t have been possible back in 2005 or certainly wouldn’t have as much traction. We think there are some ways to maybe work this out. So hopefully, fingers crossed, we’ll get it right.
Andrew: How many hours went into the first version or how much work?
AndrewG: Oh man, months of Mike’s development time, our one developer. It was a blow for sure.
Andrew: What’s one element of it, one feature that makes you look back, slap your head, and say what were we thinking?
AndrewG: Just that the only way it would function is if every tutor kept their hours updated in almost real time. That’s just way too much to ask. There are certain users, we call them power users, that will do that. But there are a lot of different varieties of people on our site and we needed to have tiers of each product that will suit the people who do one hour a week to utilize it and the people who do 50 hours a week utilizing it. That’s how we’re going to approach it this time is make it kind of tiered and more optional.
Andrew: Did you see the system that we used to book you here today and to set up your time with Jeremy? What did you think of that?
AndrewG: I thought it was slick. I got a reminder yesterday. I thought it was good. Is that a third party system?
Andrew: Yes. We actually specifically link people to the third-party’s website so that they can get to know the system that we are using. It’s Acuity Scheduling. We just like everyone to know the tools that we use. And it’s that simple. Costs like $20 bucks which is frankly for such a simple tool is a lot of money but I’d pay even more because it’s such a simple tool.
AndrewG: Yeah. There’s some good stuff out there. Yeah. That was good. Good job. You’re ahead of us on scheduling priorities.
Andrew: Well, we get to use off the shelf tools and we work with entrepreneurs who can figure out if we make any mistakes. We can figure it out. We don’t need the perfect system for . . . How many tutors do you guys have now? Thousands?
AndrewG: About 60,000 tutors on the site. I think there have been over 500,000 tutors all time that have come through utilizing the system but we only keep actively available tutors listed on the site.
Andrew: And 42 employees who are managing the company and meanwhile tens of thousands of tutors.
AndrewG: I think there’s 45 now from the time that I did the interview with [??] . . .
Andrew: The last few weeks . . .
Andrew: Hey, the company name is WyzAnt. I was just thinking about my company name Mixergy. Man, did I pick the name that you can’t spell. People will type “mix” and then the letter “r” and the letter “g”. They’ll spell it Mixergy with multiple “e”s. Every few weeks I get another alert from my domain hosting company saying “you’ve got to update . . . do you still want Mixergy with 5 “g”s because some people spelled it . . . . Do you have that issue with WyzAnt spelled W-Y-Z-A-N-T?
AndrewG: We do. It’s time we get . . . [??] . . . we certainly don’t want to be buying anything.
AndrewG: Just so you know my [??]’s last name is Weishuhn and my last name is Geant. That’s where it comes from. It’s also a smart ant’s . . . you know we got the ant with the glasses as a logo. Turns out it’s also a biblical reference which we did not know at the time there’s a wise ant in the bible. A wise resourceful ant. So it works on a few different levels. But yea, the misspelling thing is in fact . . . About 6 months ago we’ve always wanted to own the domain wiseant W-I-S-E-A-N-T because that’s obviously the most common spelling and some jerk who’s owning it . . . . Like no one else in the world would want that except for us, right? I think we ended up paying like $8,000 for the name just to redirect it to our own domain. But we finally offered WyzAnt the correct spelling as well.
Andrew: You now allow your tutors to promote themselves and one thing you do is you give them their own unique URL on your site so that they could use it to promote their tutoring service, you let them print out flyers with QR codes. Does anyone use a QR code by the way?
AndrewG: Yeah, I think so. We have actually a decent inflow of business that we source from our QR code flyers.
Andrew: Do you track that specifically?
Andrew: Wow. So you know how people are coming from a QR code on a flyer.
AndrewG: Yep. We know . . . And then we can credit it back to our tutors through our rewards program giving points for those referrals.
Andrew: I see.
AndrewG: But we source everything through a very granular level.
Andrew: That’s impressive. So one person actually saw that he can do this and he did what in Houston Texas?
AndrewG: Some guy went crazy with these flyers and maybe he got them printed out at Staples or maybe he just thought a lot of parents would be going to Staples but, for whatever reason, he just plastered this Staples location with signs up and down the aisles and we got a call from the manager saying “What’s going on here? You guys [??]”.
AndrewG: Similar to our signing issue back in the day so we weren’t too hard on him. We just asked him nicely if he’d go take them down.
Andrew: All right, let me do a quick plug here for Mixergy Premium and then I want to come back and ask you a question that I should have asked you actually as my second question based on what the first question was but . . . Mixergy Premium, I always say, is about courses taught by real entrepreneurs. In fact, Andrew do you know Nicolas Green of Ivy Insiders?
AndrewG: I don’t.
Andrew: Ok. He had a company called Ivy Insiders that did tutoring by college students for college entrance exams and he sold it. Anyway, he’s one of our teachers here. He came to Mixergy to teach how to systemize operation. I said, “Look. You know how to systemize because you have thousands of people who are teaching college entrance exams and they are all students who don’t have time to figure out your system. How did you do it?” He came and he taught how he did that and basically he did it so that entrepreneurs like me can systemize our companies too. And that’s the whole idea behind Mixergy. Get an entrepreneur who’s really good at one thing that other entrepreneurs may not even understand or care about but is critical to our businesses and have them teach it so that we can implement it in our businesses. And I know that I’ve been way more systemized ever since I learned from Nick and I keep learning from all of these entrepreneurs who come and teach. And as one Mixergy Premium member said, “Andrew, you keep telling us about the courses. You should tell people about the interviews.” So I’ll say that too. We have now over 700 interviews in depth with entrepreneurs who tell us their stories and how they built their businesses. If you’re a Mixergy Premium member, it’s all right there for you and if you’re not , dude, come on go to mixergy.com/premium, sign up, you will have access to it all, and it is growing every month, [mixergy.com/premium]. I guarantee you guys will love it. Andrew, you took down his name, and I am happy to make an introduction if you want it.
Andrew: It seems like ever since he sold this company, he has been helping other entrepreneurs in the education space. I have asked other entrepreneurs in the education space and he apparently has been a mentor, a helper to them. So I would be happy to do it.
AndrewG: It sounds good. That would be perfect. You must know a lot of very cool people from all these interviews. Your [?] is probably pretty impressive, I would think.
Andrew: You know what, I am really lucky to have gotten to know them, and they are incredibly supportive. If I asked for anything . . . They are great people. I would love to get them all together somehow, but I have not figured out how. They would like to get together somehow, but to just say, “Hey, let’s all get in a room because you were on Mixergy” is not enough of a reason to get together. Some people suggested an online group. Just because you are Mixergy interviewees, I do not think that is enough of a hook, enough of a reason to get together. Once I find that, I think it will be a really good group of people for you and other interviewees to have an opportunity to connect with.
AndrewG: Yeah, absolutely. If you feel I can be ever useful to any of the people you talk to, feel free to pass them along. We do not know everything, but we have learned some good lessons over the last seven years. So I will be happy to be helpful in any way I can to you or anybody I can talk to.
Andrew: Yeah, I would love it. Actually, in fact, we have three big lessons here that we should cover before we end this interview, but first, I asked you what your sales were. I should also ask you about net margins. When you do a business like yours where so much of the money comes in the door and then goes out to tutors, what kind of margins are we looking at?
AndrewG: I told you about our commission structure. So you can kind of get an idea of it from that. We never raise money. So, by definition, we have been a cash flow positive business. We are profitable. Our business model has worked very well.
Andrew: Are you a millionaire right now? If the business went away, would have at least a million in cash in the bank?
AndrewG: I suspect [?] worth a fair amount, but we have never really gone to market with it. We pay ourselves reasonable salaries, but nothing crazy. When you look at this, we are still at the beginning. This is such a huge industry. There are so many places we can go with this massive network of tutors. We have this great platform, a tremendous community. We really are still a startup. We are thinking it can be a lot bigger than it is.
Andrew: I did not realize how big this industry was. I did not realize how big a company like yours could be.
AndrewG: Well, not just tutoring and e-learning, and all the other great educational products and technologies that are coming up, Edtech is just huge. I mean hundreds of billions of dollars. With our network of tutors, we are uniquely positioned to do a lot of really cool things.
Andrew: All right. We will finish it off with the three big lessons that you told Jeremy you learned and that we can pass on to the audience. Do you remember what those three are?
AndrewG: Oh, I do not remember when I told Jeremy, but I probably would say the same things over again. Number one I would say is having a business model from day one. I touched on that before. You see so many companies out there that release some free product, try to grow some huge audience, and then they will [?] and monetize it. That is a recipe for [?] ton of cash. You are not going to get it right the first time, although I guess I am contradicting myself because for most part of this is my work. So, really start your education around your actual business several years into your history than the actual business of making money. That is a risky proposition in my opinion.
Number two, I think, I would say is to be flexible. You are not going to get it right the first time. It goes back to what I was saying before about going to market [early] and learning from your [?], being adaptable.
Andrew: And the third one actually is the one I was looking forward to hearing more about which was to strike a balance between automation and personal connection. Frankly, automation has done so freaking well for me, that I might be going too far. So, I wanted to hear what made you say that.
AndrewG: Yeah. It is what I was talking about before, our black box, and that our mission was to build a multi-million business with just two of us, but then along the way we realized that in tutoring in particular you have such a personal progress. You are connecting tutors with people’s children. It is an expensive product here. Oftentimes, meeting in the home, it is a service that affects kids’ education and their college admissions, and down the line to their jobs. It’s just a very important thing and there’s still, despite the movement towards online, people getting more comfortable with that, there’s still an aspect of it where parents get a lot of comfort by talking to someone on the phone. We said we had 45 employees, 30 of them are in customer service and sales interfacing with our customers. This goes back to the beginning when I was a one man customer service department and how important I realized that was, but if we try to automate all of our customer service, WyzAnt would not be the way it is.
Not only do we have a lot of customer service [??] answer your calls right away and emails right away and people [??], you picked up the phone so quickly, but the quality and caliber of our customer service reps, we have customer service reps with Master’s degrees, so well educated, so well spoken, so helpful that that is the balance I was talking about. Our systems are really scalable. We proved that in the first few years, but we also now supplement it with this personal, human touch. It really works well together. Keep it going as long as you can is what I would say. Obviously we’re in different [??] but by definition you’re a personable business. You’re talking to people through webcams, maybe you get that from there and you don’t need to add a bunch of customer service staff.
Andrew: You guys are incredibly impressive. Our system tells me, because we have this process I know what your Skype name is and I also know what your phone number is and email address. You put it all and make it available to me. When I saw in the system that you gave me an 877 number, I needed to reach you because I typed your information into Skype wrong. I said, “I’m never going to reach this guy.” Most people give me their cell numbers when I interview them, but any time it’s a company number, it’s going to go to some number overseas. They’re not going to know who the guy is. I may not even get to talk to a person, let alone talk to the person I’m trying to reach. I called up your number. I got through to a person, which was a real person. They talk the way I talk, number one. Number two, when I said my name, that person knew, “Andrew’s expecting your call.” This was just a random customer service number that I called, a random person in the company, and I called the main customer service number. I thought, “This is something impressive here.”
AndrewG: I think you saw me [??] my computer in the conference room, he’s like, “I bet you that’s what Drew’s doing there.”
Andrew: Impressive. In your office, they know what you’re doing. They’ve actually talked to you and they have a sense of who you are, which is rare in customer service numbers.
AndrewG: Alex is the one that gets the [??] open office. We all hang out. Everybody knows each other. There are no offices except for conference rooms. That’s the culture that we believe in and it seems to be working pretty well.
Andrew: Thank you for doing this interview. Thanks for sharing how you built up this incredible company. I always tell the audience to find a way to say thank you if they got anything out of this interview or anything else, just say thank you. Past guests have told me that they’ve gotten emails from people all over the world. I hope that people find a way to connect with you. Do you have any personal information that you make available for people to connect with you through?
AndrewG: I can give you my email address. You want to throw it on the web or [??] . . .
Andrew: [??] putting email on the web? I don’t want you to do something . . .
AndrewG: . . . @wyzant.com is a really easy one to remember.
Andrew: What is it?
AndrewG: firstname.lastname@example.org is our general mailbox and every single one of those that’s addressed to me gets forwarded to me and I respond to as well. That’s one you can remember. Give us a call. One of our friendly sketch [SP], reps will be happy to be available.
Andrew: I hope people find one of those ways to connect and do what I’m about to say because every time someone says thank you I notice something happen. I’m going to say this first of all, Andrew. Thank you for doing this interview, and thanks for being so open in the interview.
AndrewG: Thank you for having me. Congratulations on [??] your business and for influencing so many entrepreneurs and other business people. You’re having a big impact and I’m excited to see where you [??] it.
Andrew: Thanks. I’m loving it. Thank you all for being a part of it. Bye.